Market Overview

A Consumer Goods Growth Stock (THS)


During its five years of existence, this company's
stock has risen 148 percent, while the iShares Dow Jones U.S.
Consumer Goods Sector Index Fund (IYK)
- of which it is a member
- has risen just 6.3 percent.

That outperformance, from a typically slow growth
sector, is worth taking a closer look at.

You're more than likely familiar with this
company's products, if not its name. The company is TreeHouse
Foods (NYSE: THS)
. Last year, TreeHouse saw its share price rise
32 percent.

In 2009, TreeHouse Food's stock returned investors
a healthy 43 percent.

Based in Illinois, TreeHouse Foods says that in
the United States it sells more than half of the non-dairy coffee creamer
(Cremora and private labels), a third of the pickle products, and nearly
one-quarter of all salad dressings - not to mention one-fifth of all
canned soups. It also believes that it's both the U.S.'s and Canada's
largest producer of private label salad dressings, drink mixes, and
instant hot cereals.

These aren't exactly exciting products, but we
don't look to consumer staples stocks for excitement. We look to them for
consistent gains, and 75 percent over two years is pretty darn

While shopping for groceries most people seek out
the best value without sacrificing quality. During the recession, many
Americans turned to the store brands offered at Kroger (NYSE:
KR), Wal-Mart Stores (NYSE: WMT)
and Safeway (NYSE:
as a cost-saving alternative to the national names.

This was a boom for TreeHouse, since it provides
private label products to retailers to resell under their own brand

Many shoppers are
still skipping past better known offerings from Kraft Foods
(NYSE: KFT), Campbell Soup Co. (NYSE: CPB)
or Ralcorp
Holdings (NYSE: RAH),
to give the house brands a try ‑ and often
they've found them to their liking, especially from the savings

***TreeHouse Foods, with a market cap of $1.82
billion (2010 net sales were about the same), has been running with the
big boys. Its largest customer is Wal-Mart Stores, accounting for 18.5
percent of its annual sales in 2010. The company was created in 2005, as
a spin-off by dairy giant Dean Foods (NYSE: DF) to
shareholders of its specialty foods business.

Now, as the economic recovery solidifies I'm
betting that many consumers won't quickly jump back on board the brand
name train - rather they'll stick to their more generic, and value
oriented products.

TreeHouse Foods made two strategic acquisitions in
2010, spending $665 million on Sturm, a maker of private label hot cereal
and soft drink mixes, and $180 million for S.T. Foods, which manufactures
private label macaroni-and-cheese and other dinner products. As it
digests those deals, TreeHouse is carrying debt approaching $1

Earnings per share in 2010 grew slightly over
2009, $2.51 vs. $2.48. From 2008 to 2009, by comparison, EPS more than

***In the current quarter the consensus estimate
from Thomson Reuters calls for a 23 percent increase in revenue and a 13
percent rise in earnings per share, to $0.66. I consider TreeHouse Foods
a nice growth play in a value sector.

I constantly seek out stocks that are undervalued,
and the gains that TreeHouse Foods posted reaffirm for me that small cap
stocks ALWAYS outperform coming out of a recession.
Click here to learn more
about this exciting class of stocks.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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